Author: Cheng Wei Swee, AlphaBeta
Asia’s digital economy has grown significantly in recent years, driven by factors such as national digitalisation efforts and COVID-19-induced changes in the use of digital platforms. The Malaysia Digital Economy Blueprint, for instance, aims to transform the country into a technology-driven nation by building digital infrastructure and driving digital transformation in the public sector. To maximise growth, policymakers must establish a robust understanding of the economic benefits of digital transformation, what drives the gains, the potential challenges to growth and how they might be overcome.
Presently there are several knowledge gaps. First, various definitions of the digital economy exist, and some are relatively narrow with potential to underestimate the impacts of digital transformation. For example, some studies focus only on platform-enabled activities such as super apps. Second, differences in evaluation methodologies make regional analysis difficult. Third, there is limited research on the economic benefits of technologies applied to traditional sectors. Neglecting the impact of digital technology on traditional sectors, such as health, overlooks its transformative effects beyond the technology sector. It is important to bridge these gaps in order to reveal the opportunities, risks and solutions.
Leveraging digital technologies offers many opportunities. Eight key technologies — mobile internet, financial technology, advanced robotics, additive manufacturing, cloud computing, big data, artificial intelligence and the internet-of-things (IoT) — and their related technology applications have transformative potential. Digital e-commerce platforms, facilitated by mobile internet, for example, can unlock productivity gains of up to 15 per cent through reduced labour requirements, inventory efficiencies and lower real estate costs.
Digital technologies, it’s estimated, have the potential to create an annual economic value of US$628 billion in Japan, US$80 billion in Thailand and US$60 billion in Pakistan by 2030. This is equivalent to about 13, 16 and 19 per cent of the countries’ current gross domestic product respectively.
Traditional sectors such as retail and hospitality, health, agriculture and food account for most of these benefits. Countries are already realising that pursuing digital transformation is imperative to manage challenges induced by the pandemic and to ‘build back better’. Big data can help those tackling challenges in healthcare, social protection and education by supporting vaccine roll-outs, targeting vulnerable populations for social welfare and identifying specific skills gaps. Other technologies can address sustainability challenges such as biodiversity loss.
But there are significant barriers to realising the opportunities. Vietnam faces regulatory obstacles such as data localisation laws and limited digital connectivity. In Singapore, while most businesses have internet access and online presences, adoption rates for advanced technologies such as the IoT are low, especially for smaller enterprises.
A key regional barrier is the digital skills gap. Two in three Asian workers are not confident that they are gaining digital skills fast enough to meet future career needs and 93 per cent of workers and organisations face obstacles — such as limited awareness of training options and the lack of time — to digital skills training. As new roles emerge and skill requirements evolve rapidly, employees will need regular training to keep up with job demands. There will be implications for labour mobility if technologies create job losses, especially if there are insufficient reskilling programmes to ensure that displaced workers can transition to other jobs.
While there is tremendous potential for digital transformation, the pandemic has also underscored the existing digital divide between countries. As high-income countries accelerated digital adoption, many low-income countries were left behind because they lack the necessary enablers such as reliable and affordable internet access. They will not be able to access the benefits of technology as systems are increasingly dependent on internet connectivity. This will drive the inequitable distribution of gains from the digital economy and continue to disadvantage low-income countries.
Progress has been made to address these issues but greater partnership among stakeholders is critical to capture digital economy benefits. It is encouraging that governments in Asia have identified the digital economy as a key growth area. Examples include Singapore’s Research, Innovation and Enterprise 2025 Plan, Vietnam’s National E-commerce Development Program 2014–2020 and South Korea’s Digital New Deal. Such initiatives are making significant progress and the Global Innovation Index indicates that while North America and Europe continue to lead globally, Southeast Asia, East Asia and Oceania are the only regions closing the innovation gap.
The pandemic has also accelerated efforts to enhance access to mobile devices and the internet, narrowing the digital divide. But there is scope to push further on policy enablers and greater partnership among stakeholders. Take digital skilling — many of the best initiatives require the support of stakeholders, such as governments, employers, workers and training institutions. For example, to upskill talents, the Indonesian government could partner with industry leaders to develop skill frameworks that align with industry preferences for specific digital skills required in each sector. These frameworks could then be used to guide training efforts.
Addressing the limited awareness of training options, governments can develop skills portals to promote relevant courses and drive outreach to the masses, including displaced workers. Addressing the lack of time, training providers can work with industry to develop short-term micro-skills training courses. With this support, employers can leverage free training courses to upskill their workers. Finally, workers will need a mindset shift towards lifelong learning and must realise that upskilling does not always require formal degrees but can be undertaken through micro-skills courses.
The pandemic has amplified the importance of digital transformation in Asia in boosting long-term economic performance and resilience. Key stakeholders — such as governments and businesses — need to understand the economic impacts of digital transformation across sectors, identify existing gaps and risks and collaborate on steps to reap its full potential benefits. If the digital opportunity is captured, it presents a multibillion-dollar way forward for Asia’s economy, a much-needed boost in the post-pandemic era.
Cheng Wei Swee is a Senior Manager at AlphaBeta.
This article appears in the most recent edition of News JU Quarterly, ‘Asia’s Digital Future’, Vol 14, No 2.
The post Investing in the skills to accelerate equitable digital development first appeared on News JU.